Canadian Businesses' Secret Weapon: Purchase Order Financing Unveiled

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Fulfill Large Orders with Ease: A Guide to Purchase Order Financing Business Finance

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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Direct Email = sprokop@7parkavenuefinancial.com

 

Navigating Big Orders? A Comprehensive Guide to P.O. Financing in Canada

 

 

INTRODUCTION  - PURCHASE ORDER FINANCE IN CANADA: A GUIDE FOR CANADIAN BUSINESSES

 

Purchase Order Financing and Inventory Financing are emerging alternative financial solutions in Canada's business landscape.

 

Supplier payment schedules can be challenging for companies lacking substantial equity. Suppose your business gets orders faster than your existing working capital can handle. Talk to 7 Park Avenue Financial about purchase order (PO) financing and how it can be a practical short-term solution to facilitate growth.

 

For businesses dealing with finished or nearly finished goods from suppliers,  PO financing aids in fulfilling supplier demands. It bridges the potentially long gap between a product being prepared for transit and the customer's receipt and payment.

 

 

Paired with traditional sources of financing from Canadian chartered banks or independent finance firms, these solutions from purchase order financing companies offer supplementary flexibility for small business owners and SME's.. Let's dig in.!

 

Challenges in Traditional Business Financing

 

Traditional business financing revolves around working capital and cash flow, focusing on current receivables and inventory assets.

 

Even if your firm is well-capitalized and has an established bank credit line, fulfilling large orders or contracts can be daunting. This challenge intensifies when traditional financing is unavailable, making cash generation for larger orders and contracts seemingly unattainable.

 

What is Purchase Order Financing?  How does purchase order financing work? The Concept of P.O. Financing

 

Purchase order financing, or " PO Financing, "is a relatively new phenomenon in Canada. It provides the capital a small business owner / SME needs to complete large orders and contracts and can complement your existing financing arrangements if implemented correctly.

 

 How P.O. Financing Works

 

This financing covers your material and direct labour costs, often 60-70% of many businesses' total orders or contracts. Your firm can thus leverage working capital to finance production, leaving the profit from your P.O. or contract as a residual amount.

 

 

 Key Considerations for Qualification in P O Finance

 

Qualifying for such financing requires sufficient proof of a valid, creditworthy order or contract. If there's doubt about payment or creditworthiness, it may hinder the successful completion of the purchase order financing. Additionally, this solution is not designed for long-term financing, and funds are generally repaid once the order or contract is fulfilled.

 

 PURCHASE ORDER FINANCING VS. FACTORING

 

Technical Issues in Financing Arrangements

 

When secured financing arrangements are already in place, such as a bank line of credit, understanding the security taken in the Purchase Order and resulting receivables is crucial. Purchase order financing typically works best without a secured lender, but additional collateral or personal guarantees may be needed.

 

The Importance of Gross Margin

 

Healthy gross margins are vital for P.O. Financing. Low-margin, commodity-driven businesses may struggle with this financing model, as the blend of costs and financing charges leaves limited profit. Therefore, robust gross margins make for a more favourable P.O. Financing deal.

 

 The Growing Popularity of Purchase Order Financing

 

The current Canadian business financing climate is challenging, opening doors for alternative financing methods like P.O. Financing. It can fuel growth, improve profitability, and enhance competitive positioning within your industry.

 

 

Case Study: Understanding Purchase Order Financing Fees Through a Practical Example

 

 

Background: Purchase order financing fees are a critical aspect of considering this financial solution. Typically ranging from 2% to 4% per month and priced on a per-30-day period, these fees are charged on the supplier's total costs and may increase the longer a customer takes to pay their invoice.

Scenario: In this case study, we explore an example where a business entered into a purchase order financing agreement. The supplier was paid $200,000, and the financing company charged a fee of 2% per 30 days.

• 30-Day Payment: If the customer paid their invoice within 30 days, the total fees were 2% of $200,000, amounting to $4,000.
• 60-Day Payment: If payment took 60 days, the total fees doubled to 4% of $200,000, totalling $8,000.
•  

While these fees may seem relatively low, converting them into annual percentage rates (APRs) reveals a more substantial cost, often exceeding 20%.

Purchase order financing fees depend on various factors, including business qualifications, customer creditworthiness, and supplier reputation. The chosen example illustrates the essential considerations and potential complexity of purchase order financing, emphasizing the importance of fully understanding the fee structure and overall cost when evaluating this option.

 

 

Key Takeaways:

 

1. Definition: Purchase order financing is a funding option for businesses to cover the costs of materials or goods needed to fulfill purchase orders.

2. Applicability: Purchase order loans are useful for manufacturers, wholesalers, distributors, and import/export companies.

3. Process Overview:

   • The business receives a purchase order without sufficient funds or inventory.

   • Applies for purchase order financing from a financing company.

   • Financing companies may cover up to 100% of the supplier's costs based on the supplier's reputation and the customer's creditworthiness.

   • The financing company pays the supplier directly (via a letter of credit).

   • Business invoices the customer and provides an invoice copy to the financing company.

   • The customer pays the financing company directly.

   • The financing company deducts its fee and sends the remaining funds to the business.

4. Benefits:

   • Allows businesses to fulfill orders without waiting for funds from customers.

   • It helps prevent missed opportunities due to a lack of capital.

   • Enables business growth and expansion.

5. Costs:

   • Purchase order financing can be expensive.

   • Fees range from 1.8% to  3% of the monthly purchase order value.

   • When converted to an APR, a 3.5% monthly fee equates to over 40%.

6. Parties Involved:

   • Your business (applicant)

   • Purchase order financing company

   • Customer (who placed the purchase order)

   • Supplier (from whom goods are being purchased/manufactured)

7. Key Advantage: It involves more parties than a traditional loan and can cover costs even when a business lacks the funds or inventory.

8. Use Case Scenario: When a business receives a purchase order for goods, it lacks stock and needs financing to fulfill the order.

9. Payment Flow:

   • The financing company pays the supplier directly.

   • Business invoices the customer.

   • The customer pays the financing company.

   • The financing company deducts its fee and transfers the remaining funds to the business.

10. Consideration: While it helps meet orders, the high fees should be carefully weighed against potential profits.

 

 

CONCLUSION

 

Call 7 Park Avenue Financial, a trusted, credible and experienced Canadian Business Financing Advisor, if you are considering Purchase Order Financing.  Let the 7 Park Avenue Financial team assist in optimizing your cash flow and working capital through this innovative financing approach to a business loan.

 

  

FAQ: FREQUENTLY ASKED QUESTIONS  PEOPLE ALSO ASK /  MORE INFORMATION

 

What is Purchase Order Financing, and how is it different from traditional financing?


 Purchase Order Financing is a short-term financial solution providing capital to fulfill large orders or contracts. Unlike traditional financing, it's tailored to cover material and labour costs, thus aiding businesses in completing significant transactions without requiring extensive capital reserves.



 How does my business qualify for Purchase Order Financing?


Qualification for Purchase Order Financing requires a valid and creditworthy order or contract, healthy gross margins, and, often, a lack of existing secured lenders. Collaboration with a reputable Canadian Business Financing Advisor can guide you through the qualification process.



 Is Purchase Order Financing suitable for long-term financial planning?


No, Purchase Order Financing is a short-term solution to help businesses fulfill specific orders or contracts under a purchase order financing agreement. Purchase order funding is not meant to replace traditional long-term financing strategies like bank loans or lines of credit.


 What kinds of businesses benefit most from Purchase Order Financing?


Businesses that face large orders or contracts and need immediate working capital to cover material and labour costs benefit the most from P.O. Financing. It's particularly suitable for firms with good gross margins as margins offset the financing cost and those operating in industries where significant contract fulfillment is common.


Why should I consider Purchase Order Financing for my Canadian business?


Purchase Order Financing offers flexibility and the ability to fulfill large orders without straining your existing financial resources. PO Financing companies can assist you in accessing cash flow, enabling growth, and improving your company's competitive positioning. It's an innovative alternative to traditional financing that aligns well with the unique challenges and opportunities of the Canadian business landscape.


Can I use Purchase Order Financing for international orders, or is it limited to domestic orders within Canada?


Purchase Order Financing is generally applicable to both domestic and international orders. The key consideration is the creditworthiness and validity of the customer's purchase order or contract. It's advisable to consult with a Canadian Business Financing Advisor to understand the specific requirements and regulations for international transactions.


Are there any industries where Purchase Order Financing is particularly ineffective or not recommended?


Purchase Order Financing may not be suitable for businesses with extremely low margins or in industries where the combination of costs and financing charges leaves minimal profit. Understanding your industry's dynamics and discussing with a financial expert can help determine if this financing model aligns with your business needs.


What are the typical interest rates or fees associated with Purchase Order Financing in Canada?


Interest rates and fees for Purchase Order Financing can vary based on factors such as the po financing company you use,  the risk associated with the order, and the overall financial standing of your business. Working closely with a financing provider or advisor is essential to understand the exact costs tailored to your situation.

Should the financing company approve you for only a portion of the funding to pay suppliers, such as 90% of the supplier's costs, it will be your responsibility to cover the remaining balance of 10% on your own.



How quickly can I access funds through Purchase Order Financing? Is it a fast process?


Accessing funds through Purchase Order Financing can be relatively quick, often depending on the lender's requirements and the complexity of the order.

 

Timelines for the cash advance may vary until the financing company approves the transaction. However, working with an experienced Canadian Business Financing Advisor can often expedite the process and ensure that funds are available when needed. In most cases, a personal guarantee might be required.


Can I combine Purchase Order Financing with other types of financing, like bank loans / small business loans or Factoring / Invoice financing / Invoice factoring?


Yes, Purchase Order Financing can often be combined with other financial solutions, depending on the existing financial arrangements and the specific needs of your business. A comprehensive assessment with a financial expert specializing in Canadian business financing can provide insight into crafting a customized, multifaceted financing strategy.

 

  

 What are the pros and cons of purchase order financing?

 

 

Pros:

1. Availability for Startups: New businesses and startups may be eligible, even without a long history that traditional lenders usually require.
2. Credit Flexibility: Lower business credit may not be a hindrance if the customer has good credit.
3. Rapid Funding: Unlike traditional bank loans, funding can occur within a matter of days.

Cons:

 

1. Limited Applications: It's only applicable for covering supplier expenses, and companies may require a minimum expected profit margin of at least 20%.
2. Partial Coverage Risk: Might not cover the entire cost of an outstanding purchase order, leaving the business to cover the rest.
3. Potential Relationship Strain: Since customers pay the lender, not your business, this can impact your reputation or strain customer relationships. 

 

 

 

What are alternatives to PO Financing?

 

1. Invoice Financing: Borrowing against outstanding accounts receivable, useful for healthy revenues and short-term expenses.
2. Invoice Factoring: Selling outstanding invoices to a factoring company for immediate cash, suitable for businesses needing quick access to funds.
3. Merchant Cash Advance (MCA): An advance against future sales, with a faster approval process than traditional loans.
4. Line of Credit: A flexible option not requiring collateral, allowing use for any purpose, including inventory purchase.
5. Term Loans: Lump sum loans for various purposes, available from local banks and credit unions.
6. Government of Canada Loans / EDC Financing: Offer interest rate caps and government guarantee, potentially a lower-cost alternative to PO financing for small businesses.

 

 

 

 

Click here for the business finance track record of 7 Park Avenue Financial

Purchase Order Financing Canada 101 ! P O Financing & Inventory Finance Solutions

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Generating profits Via Inventory & Finance Solutions

Purchase Order Financing Canada 101 ! P O Financing & Inventory Finance Solutions

What is Purchase Order Financing?

The need for P O Financing is often viewed as a good news / bad news scenario Your firm has the ability to receive  customer orders or contracts but you are challenged with restrictions or unavailability of inventory and PO (purchase order) financing. Growing your business and financing a business based on assets such as inventory and orders in coming in has never been more of a challenge in Canada.

Benefits of P O Finance

The key benefit of purchase order contract is your ability to fulfill orders that might not have been made given finance limitations . That allows a business to grow and generate additional profits. The ability to fill your client order with no serious cash flow implications to your day to day operations is key .


When we speak to clients we advise there is no one method that seems to handle all inventory and po finance challenges. But the good news is that via a variety of effective business financing tools you can employ you are in a position to generate working capital and cash flow from these two asset categories. Let’s examine some real world strategies that have made sense for clients.
The attractiveness of this type of business finance is that it can be accessed quickly, typically in days, not months !

The root of the problem is simple, you have orders and contracts, but those will potentially be lost to a competitor. Conventional wisdom is that you go to your bank and ask for financing to support inventory and purchase orders. As you may have experienced, we aren’t big believers in conventional wisdom on that matter!

However, utilizing a conventional purchase order funding source does allow you to purchase a product and get your suppliers paid, thus facilitating your ability to deliver to your customers. In some cases more established firms may wish to consider EDC financing via the Government crown corporation, typically for international sales .

One of the main benefits that many clients don’t realize in purchase order finance is that inventory financing and purchase order contract financing doesn't necessarily require your firm to have a long or strong credit history; the focus on structuring the transaction is around the inventory being financing and the general creditworthiness of your client, who will be paying yourself or the inventory or P O financing firm

How Does Purchase Order Financing Work

The overall process is fairly simple and easy to understand when it comes to putting the transaction together successfully. On receipt of your confirmed purchase order your supplier is paid via cash or a letter of credit. Your firm of course completes the final shipment of the product, which typically involves some additional time on your firms part.

To qualify your firm must be able to prove you have a credit worthy supplier and customer . Because Purchase Order Finance is a more expensive form of financing you should ensure you have healthy gross margins in order to absorb the financing cost ; that should typically be at least in the 15-20% range . Tranasaction should always be a B2B ( Business to Business ) sale . Goverment purchase orders and contracts can be financed also ! It is safe to say that goods must be tangible in nature.

On shipment and of course payment from your customer the transaction is in effect settled. In a true pure PO financing scenario the P O funder is paid immediately on your invoicing of the product. That is facilitated by your firm selling the receivable via a factoring type transaction as soon as you have generated the invoice.

This type of financing works best when it can assist a smaller firm to increase revenues when normal cash flows can’t finance these sales . Smaller businesses obtaining large orders get immediate access to working capital

Many fast-growing businesses come to a point where sales outpace incoming revenues, leaving them without enough cash flow on hand to cover operating expenses or new orders. PO financing and invoice factoring help small businesses stabilize their cash flows and gain access to working capital.

There are always limitations to this type of financing - so things we look for early in the transaction are the ultimate remarket ability of your product in case there is a transaction risk. Naturally, as we stated, the overall creditworthiness of your customer is key, his receipt of goods and payment in effect closes the transaction.

Inventory financing and PO financing are generally more expensive than traditional financing, due mainly to the significant transaction risk that the lender takes. Therefore we strongly recommend that your firm has solid gross margins in the 25% range to cover the associated costs of a PO financing, inventory financing transaction that also factors in the time it takes to get paid by your client, as that typically adds 30-60 days on to the whole cycle of the transaction.

What Comes First? Invoice or Purchase Order

There is a key difference between purchase order financing and invoice factoring/invoice discounting , but both have the same goal in site, ensure you can cash flow your business revenues . Financing the receivable happens after you have sold your goods, the P O process is of course prior to the sale .


One of the best ways to ensure the maximum financing of your sales, p o’s and contracts is to consider an asset based line of credit for cash flow needs . Coupled with a facility that will finance your purchase orders this is the ultimate working capital tool that will allow you to grow business quickly and significantly. This type of facility is generally a non bank facility and is offered by independent finance firms.

Speak to a trusted, credible and experienced Canadian business financing advisor and financing company  with a track record of finance success  who will assist you putting together a working capital and cash flow solution that works!







7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



Business financing for Canadian firms, specializing in working capital, cash flow, asset based financing, Equipment Leasing, franchise finance and Cdn. Tax Credit Finance. Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

Stan has had a successful career with some of the world’s largest and most successful corporations. He is an experienced

business financing consultant

.

Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.


Stan has over 40 years of

business and financing experience

. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in-depth, hands-on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.









Stan Prokop

Purchase Order Finance In Canada : Made To Measure Cash Flow Financing For Orders / Contracts

Purchase Order Financing Is One Way To Navigate the Minefield Of Cash Flow Financing Growth

OVERVIEW – Information on purchase order finance solutions in Canada. Financing sales via the right cash flow solution increases revenue potential and profits

Stan Prokop


Purchase order finance solutions in Canada address continuous comments from new clients. Their issue? 'Getting working capital financing for my orders and contracts actually is harder than getting the order itself? '. Let's dig in.

How do Canadian business owners/financial mgrs address their ability to get large new orders and contracts, fulfill the job, and did we forget to mention - get paid ?! It is the working capital and cash flow that come out of those contracts and orders that will of course help you grow sales and profits.
So how does purchase order financing and P.O. Factoring work in Canada? And is it actually available?! Here are your answers:
Purchase order financing or factoring provides you with capital for the key elements of your business, i.e. Product purchases, payroll, and working capital to carry receivables. Most clients we meet in the purchase order finance area have what can only be describe as the best and worst of problems - that is to say they have the order , they just don't have access to the capital to complete the order or project .

The downside of being able to fulfill those orders without proper financing is place is that you don't want to strain your relationship with key suppliers, while at the same time you strive to deliver your product or service on an 'on time 'basis.

Naturally your ability to accept larger orders enhances your overall competitiveness within your industry, and larger orders usually translate (hopefully!) into larger profits. That's how smaller companies get bigger.

Canadian business owners and financial managers consider purchase order financing and the factoring of their purchase orders, but at the same time they don't want to take on additional debt, or give up ownership of their business to an investor / partner.
Looking for the basic ' mechanics ' of P O Finance. It starts with having a P.O. and contract from a legitimate credit worthy company - More often than not some of these clients can actually be outside of Canada - we see that all the time.

The purchase order finance firm - typically a commercial finance company - not a bank , provides you with the minimum amount of capital you need to complete the orders. In certain cases this might involve making payments to your supplies on your behalf.
In some cases the PO finance or P O Factoring firm could be asked to issue a letter or credit to a supplier on your behalf - that is also a common P.O. financing and factoring strategy that achieves similar objectives.

Therefore the benefits of this type of Canadian business financing are very clear:

Being competitive on large orders/contracts!

Other alternatives to order/contract financing? You could enter into long term working capital or cash flow loans, but these typically involve payments that are fixed over 3-5 years. P O Financing strategies bring no debt to the balance sheet - you're monetizing /cash flowing and order/contract! Although purchase order financing is generally quite a bit more expensive than bank financing it allows you to do short term financing without taking on additional debt on your balance sheet.



Speak to a trusted, credible and experienced business financing advisor who can provide you with information on how PO financing and factoring works based on your unique company/industry needs.


Stan Prokop - founder of 7 Park Avenue Financial –
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 13 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :

http://www.7parkavenuefinancial.com

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing with the intelligent use of experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop

Who's Financing Inventory and Using Purchase Order Finance (P O Finance)? Your Competitors!

Information on purchase order financing in Canada. How does P O finance and financing inventory work for firms with contracts and orders that cant be financed via your bank.

It's time. We're talking about purchase order finance in Canada, how P O finance works, and how financing inventory and contracts under those purchase orders really works in Canada. And yes, as we said, its time... to get creative with your financing challenges, and we'll demonstrate how.

And as a starter, being second never really counts, so Canadian business needs to be aware that your competitors are utilizing creative financing and inventory options for the growth and sales and profits, so why shouldn't your firm?

Canadian business owners and financial managers know that you can have all the new orders and contracts in the world, but if you can't finance them properly then you're generally fighting a losing battle to your competitors.

The reason purchase order financing is rising in popularity generally stems from the fact that traditional financing via Canadian banks for inventory and purchase orders is exceptionally, in our opinion, difficult to finance. Where the banks say no is where purchase order financing begins!

It's important for us to clarify to clients that P O finance is a general concept that might in fact include the financing of the order or contract, the inventory that might be required to fulfill the contract, and the receivable that is generated out of that sale. So it's clearly an all encompassing strategy.

The additional beauty of P O finance is simply that it gets creative, unlike many traditional types of financing that are routine and formulaic.

It's all about sitting down with your P O financing partner and discussing how unique your particular needs are. Typically when we sit down with clients this type of financing revolves around the requirements of the supplier, as well as your firm's customer, and how both of these requirements can be met with timelines and financial guidelines that make sense for all parties.

The key elements of a successful P O finance transaction are a solid non cancelable order, a qualified customer from a credit worth perspective, and specific identification around who pays who and when. It's as simple as that.

So how does all this work, asks our clients.Lets keep it simple so we can clearly demonstrate the power of this type of financing. Your firm receives an order. The P O financing firm pays your supplier via a cash or letter of credit - with your firm then receiving the goods and fulfilling the order and contract. The P O finance firm takes title to the rights in the purchase order, the inventory they have purchased on your behalf, and the receivable that is generated out of the sale. It's as simple as that. When you customer pays per the terms of your contract with them the transaction is closed and the purchase order finance firm is paid in full, less their financing charge which is typically in the 2.5-3% per month range in Canada.

In certain cases financing inventory can be arranged purely on a separate basis, but as we have noted, the total sale cycle often relies on the order, the inventory and the receivable being collateralized to make this financing work.

Speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success
as to how this type of financing can benefit your firm.


Stan Prokop - founder of 7 Park Avenue Financial –

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing. Info & Contact Details :

http://www.7parkavenuefinancial.com


7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653


Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing with the intelligent use of experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.






Stan Prokop



Article Source: http://EzineArticles.com/5614956

Guess Who’s financing inventory and using purchase order Finance ( P O finance) ? Only Your Competitors – that’s who !

It's time. We're talking about purchase order finance in Canada, how P O finance works, and how financing inventory and contracts under those purchase orders really works in Canada. And yes, as we said, its time... to get creative with your financing challenges, and we'll demonstrate how.

And as a starter, being second never really counts, so Canadian business needs to be aware that your competitors are utilizing creative financing and inventory options for the growth and sales and profits, so why shouldn’t your firm?

Canadian business owners and financial managers know that you can have all the new orders and contracts in the world, but if you can’t finance them properly then you're generally fighting a losing battle to your competitors.

The reason purchase order financing is rising in popularity generally stems from the fact that traditional financing via Canadian banks for inventory and purchase orders is exceptionally, in our opinion, difficult to finance. Where the banks say no is where purchase order financing begins!

It's important for us to clarify to clients that P O finance is a general concept that might in fact include the financing of the order or contract, the inventory that might be required to fulfill the contract, and the receivable that is generated out of that sale. So it’s clearly an all encompassing strategy.

The additional beauty of P O finance is simply that it gets creative, unlike many traditional types of financing that are routine and formulaic.

It’s all about sitting down with your P O financing partner and discussing how unique your particular needs are. Typically when we sit down with clients this type of financing revolves around the requirements of the supplier, as well as your firm’s customer, and how both of these requirements can be met with timelines and financial guidelines that make sense for all parties.

The key elements of a successful P O finance transaction are a solid non cancelable order, a qualified customer from a credit worth perspective, and specific identification around who pays who and when . It's as simple as that.

So how does all this work, asks our clients .Lets keep it simple so we can clearly demonstrate the power of this type of financing. Your firm receives an order. The P O financing firm pays your supplier via a cash or letter of credit - with your firm then receiving the goods and fulfilling the order and contract. The P O finance firm takes title to the rights in the purchase order, the inventory they have purchased on your behalf, and the receivable that is generated out of the sale. It's as simple as that. When you customer pays per the terms of your contract with them the transaction is closed and the purchase order finance firm is paid in full, less their financing charge which is typically in the 2.5-3% per month range in Canada .

In certain cases financing inventory can be arranged purely on a separate basis, but as we have noted, the total sale cycle often relies on the order, the inventory and the receivable being collateralized to make this financing work.

Speak to a credible, trusted and experienced Canadian business financing advisor as to how this type of financing can benefit your firm.

--
Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/p_o_purchase_order_finance_financing_inventory.html

Real World Lessons On Inventory Financing from Purchase Order To Cash

Information for Canadian business owners and financial managers on non bank inventory financing and purchase order finance . How do these finance mechanisms work, and are they alternatives to bank financing that make sense for sales and profit growth .

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It's possible. It’s certainly not easy though, but inventory financing and purchase order finance are two little known and under utilized Canadian business financing strategies for business owners and financial managers.

In certain industries, probably yours if you are reading this! , inventory is one of your key assets. The turnover and financing of that inventory play a key role in your sales and profit growth. You ability to purchase and turn inventory are key to the earnings you generate. That’s why when clients ask for information on their ability to finance purchase orders and inventory it becomes critical that they understand their options and the cost of those options.

It's worth stepping back a bit and focusing on the fact that your ability to manage your inventory will play a key role in the ability to finance it. Simply speaking your ability to demonstrate turnover of product, controls in purchasing, and as important, and your firm’s ability to demonstrate reporting around this key current assets on your balance sheet.

The purchase order/contract and sales generation is of course the ultimate balance act for any firm - no inventory, or improper levels wont allow you to fulfill sales, too much inventory can drain cash flow .

Financing inventory in Canada really boils down to two essential solutions, your bank, or independent finance firms who are willing to take greater risks and offer you additional leverage on financing your products. Why do they take more risk - simply because it’s their business to understand your industry and the nature of your products and the ultimate salability or liquidation value? Their expertise in this area translates into greater borrowing power for your firm - and that’s a good thing!

Investing and monetizing your inventory is a good thing, provided that the inventory produces a solid rate of return - therefore financing and management of your products is key to overall business success.

Inventory financing and purchase order finance is Canada is available, it’s also specialized. As your firm generates new contracts and purchase orders that you are having a challenge in fulfilling (because of finance and cash flow pressures) you should consider finding an alternative source of financing based on your overall current business financing with your senior lender, typically a bank.

Specialized inventory financing and purchase order finance firms are most likely your problems solution. Funding is provided to fund the cost of your products with your suppliers, and the actual day to day finance strategy is much focused - payments are made to your suppliers, often directly, allowing you to receive product, and ship, thereby generating a receivable. Receivables turn into cash and the cycle is complete.

Inventory finance works best when it involves a holistic approach of collateralizing the purchase order, the inventory and the receivable that you generate as sales revenue .That by its necessity typically involves a non banking institution, i.e. the private independent finance firms we've discussed. One tool, an asset based line of credit which collateralizes inventory, A/R, and even equipment is often the total solution you are looking for.

Speak to a trusted, credible and experienced business financing advisor to ensure you understand solutions available to inventory and p o financing for long term sales and profit growth.
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Stan Prokop - founder of 7 Park Avenue Financial - http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/purchase_order_finance_inventory_financing.html